Price is what you pay. Value is what you get.
In recent years Microsoft has acquired many which have been a mixture of success and failure (Nokia). When a company creates billions in profits, you need to invest the money to generate more money and fit in with your strategy. This article will highlight key points in the acquisition and how it fits in with the current Microsoft Dynamics strategy.
What do we know
I have taken interesting facts and snippets from various and ever expanding list of articles on the subject.
Microsoft has brought LinkedIn for $26.2 billion and $196 per share in an all-cash transaction
facts from bloomberg article – Microsoft to buy LinkedIn in deal value at 26.2 billion
- LinkedIn will retain its brand, culture and independence and Jeff Weiner will remain chief executive officer of the company, Microsoft said in a statement Monday.
- The offer values LinkedIn about 91 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.
- The deal is the largest under the tenure of Microsoft CEO Satya Nadella
- LNKD up ~47% to right near the takeover value.
- Shares of MSFT, though, are down almost 3%.
LinkedIn’s book value is just $4.6 billion (so they have paid 6 times their book value)
LinkedIn didn’t make money last year, posting a loss of $166 million in 2015. The loss accelerated in Q1 to $45.8 million/quarter.
- 19 percent growth year over year (YOY) to more than 433 million members worldwide
- 9 percent growth YOY to more than 105 million unique visiting members per month
- 49 percent growth YOY to 60 percent mobile usage
- 34 percent growth YOY to more than 45 billion quarterly member page views
- 101 percent growth YOY to more than 7 million active job listings
Never in my wildest dreams, could I have imagined what would happen in the next 7½ years. Our team has grown from 338 people to over 10,000, our membership from 32M to over 433M and our revenue from $78M to over $3 billion.
The Microsoft-LinkedIn deal, which is expected to close by the end of the calendar year
Microsoft Dynamics CRM and LinkedIn current integration
- Be more productive with sales navigator and Microsoft Dynamics CRM
- LinkedIn extends sales navigator with Microsoft Dynamics CRM integration
- LinkedIn integrates sales navigator with Microsoft Dynamics CRM
Microsoft previous acquistions
This article has a good overview of Microsoft acquisitions: Its biggest hits and misses, it has some interesting facts
- Nokia – $7.2 Billion – 2014
- Minecraft – $2.4 billion – 2014
- Yammer – $1.2 billion – 2012
- Skype for $8.5 Billion, 2011
- Visio – $1.375 billion – 2000
- Navision – $1.45 billion – 2002
- aQuantive – $6.3 billion – 2007
- Rare – $375 million – 2002
- Tellme Networks – $800 million – 2007
Big acquisitions are fraught with danger and depending what made up figures you read but many articles suggest mergers fail 70 to 90 percent of the time. When Microsoft previously made big purchases, they have not always gone well, Nokia being the standout failure (I loved my first Nokia mobile).
Microsoft and LinkedIn will need to work hard to make this a success.
What does it mean for Salesforce
With Microsoft buying LinkedIn, I questioned LinkedIn’s current integration with other applications, how many are there and what will happen to them. LinkedIn is not integrated with many other applications.
The sales connector mentioned above integrates with Microsoft and Salesforce, I was expecting lots of applications to integrate with LinkedIn. The article below explains the small number of integrations
It seems LinkedIn is selective about what companies can integrate with LinkedIn, the value of LinkedIn is the people it has in it’s database who are using it’s website.
The lack of companies which integrate with LinkedIn shows a sense of direction and a clear strategy. Satya has played nicely with Salesforce last year creating a partnership, which is discussed below
- Why did Microsoft partner with Salesforce?
- Understanding the Microsoft and Salesforce partnership – why and what now?
Will Satya share LinkedIn with Salesforce or will he turn the screw and allow Microsoft Dynamics to create a competitive advantage by only integrating with Microsoft.
Why did Microsoft buy LinkedIn
In the public presentation it has the slide below showing both company mission statements
Empower every person and every organization on the planet to achieve more
Connect the world’s professionals to make them more productive and successful
They share elements of a common goal of helping people and organisation work productively by working together, Microsoft uses technology to help connect people, LinkedIn uses it’s website. The key element is people and LinkedIn have 433 million people who Microsoft can try and tap into.
Microsoft strategy is Cloud first, mobile first and
In this article We just talked to Satya Nadella and Jeff Weiner about why Microsoft decided to buy LinkedIn Satya mentions the points he considered
- Does it help Microsoft expand the addressable market?
- Does it help “ride some new technology waves that are secular that are increasing engagement with users?”
- Is it core to Microsoft – “is it something where Microsoft can uniquely differentiate?”
Buying LinkedIn fits into Microsoft’s cloud strategy which is an area Microsoft needs to keep pushing into if it’s going to convert itself to a cloud solution company from a desktop solution company.
These quotes from here highlight the potential of the deal
It helps us differentiate ourCRM product with social selling. It helps us take Dynamics [Microsoft’s suite of business management software] into new spaces like human capital management with recruiting, and learning, and talent management.”
He also said that the deal would help Microsoft target “sales professionals, talent people, and recruiting folks, as well as marketeers who are looking for B2B marketing targeting.”
This quote gives a strong indication where the future lies for the LinkedIn/Microsoft, it’s taken from Satya’s LinkedIn Memo
It requires a vibrant network that brings together a professional’s information in LinkedIn’s public network with the information in Office 365 and Dynamics. This combination will make it possible for new experiences such as a LinkedIn newsfeed that serves up articles based on the project you are working on and Office suggesting an expert to connect with via LinkedIn to help with a task you’re trying to complete. As these experiences get more intelligent and delightful, the LinkedIn and Office 365 engagement will grow. And in turn, new opportunities will be created for monetization through individual and organization subscriptions and targeted advertising.
It sounds good in theory, we need to see how it will work in practice, we wouldn’t want a LinkedIn version of the paperclip!
Here is a good article 6 Ways the LinkedIn Acquisition Will Improve Microsoft Dynamics CRM
Will it be successful?
Most acquisitions fail because the company buying is focused on what benefits the company being brought can bring, successful acquisitions focus on the benefits they can bring to the company they are purchasing.
Now LinkedIn is owned by Microsoft, it can pursue a long-term strategy, focusing on integrating with Microsoft and not waste time, effort and money on short term strategies. Microsoft can if they choose speed up LinkedIn’s development and growth
Integrating LinkedIn with Microsoft office products/Office 365 and Microsoft Dynamics products can add value to the LinkedIn and give Microsoft a unique differentiator..
One area LinkedIn is lacking is the integration of it’s data with companies, this could happen with integration with Office 365 and Microsoft Office products.
The value of LinkedIn isn’t the technology but the people registered on LinkedIn, these are of great value to Microsoft. Microsoft has overpaid in today‘s market but this might turn out to be a great investment in 5 to 10 years time.
Without Microsoft LinkedIn has a great business model, LinkedIn haven’t monitized their platform much, improvements in this area will bring larger profits. Being owned by Microsoft should help and could prove profitable for both Microsoft and LinkedIn.
Letting LinkedIn be its own company is a great move because it was doing a good job in a different way to Microsoft, so instead of disrupting it, let it continue.
Whats the buzz in the CRM community
There will be more news and articles in the days to come but yesterday I saw these
Microsoft have overpaid but when there is cash in the bank and slowing growth you feel you should act. The 433 million users will be a massive benefit to Microsoft and buying LinkedIn they purchased the leading working network site.
Most professionals use LinkedIn and Microsoft Office products, integrating them will save time and add value to those people who use them.
inkedIn integration to the Microsoft Dynamics products will give Microsoft a competitive advantage Salesforce and other CRM products won’t be able to match.
The price Microsoft has paid is a testament to the progress LinkedIn has made because of LinkedIn size, it would be difficult for Microsoft to compete by creating it’s own platform, Microsoft needed LinkedIn more than LinkedIn needed Microsoft.
Buying LinkedIn fits in with Microsoft’s cloud strategy and helps them to continue to grow in this market. LinkedIn will become a profitable company on its own but working with Microsoft both companies can benefit.
The main criticism with the acquisition is the price, Microsoft have overpaid big time but this is only a consideration in the short term and it was money Microsoft had in cash! I will end with the same Warren Buffet quote
Price is what you pay. Value is what you get.
- Microsoft CEO Satya Nadella LinkedIn Memo